Managed Services - An Overview

by Krishnakumar Madhavan, Head IT, KLA-Tencor India

Managed Services are skilled outsourcing functions that transfer, in-house functionalities to be managed by third party managed services provider (MSP). The services available in managed services market can include outsourcing the Production Support activities, HR activities, Lifecycle Management activities, Maintenance and Support activities, IT Resource and many more activities. Such outsourced services enable organizations to bring in competences that they lack or to replace functions or processes that incurred huge recurring costs. Managed Services have proven to reduce the recurring in-house IT costs by 30-40% and bring an increase in efficiency by 50-60%.

As we see the cost advantage in carrying out the Managed service contracts, more managed services work will come to India. Gone are the days that MSP charge to clients based on Headcount or T&M model due to Automation. Automation makes things faster and better with less employees. Some of the key vendors occupying the managed services market are Accenture, Cisco, Dell, HP, HCL, IBM,Microsoft and Wipro.

Despite the encouraging growth in the managed services market, there are a number of challenges that overshadow the vendors and organisation at different stages of migration and implementation of this service. It has been observed that there is a dearth of skilled staff in managed services to take up the knowledge transfer. Likewise, the client’s team may not cooperate well in the Knowledge transfer session.The principal idea behind Managed services being outsourcing of certain responsibilities to a third party, the employees in the client organisation may fear losing the job and hence refrain from giving information.Increase in Labour and associated Cost in India may reduce the profitability. Establishing the right network connectivity and legal compliance is another challenge.Above all, transitioning the client into managed security services is perhaps the most challenging part of any service relationship. The implementation must be planned and executed with great care. Problems at this point can be due to added costs to client, dissatisfaction and a rapid breakdown of the relationship. This is where an MSP's professional project management skills are essential.

Along with catering to the change in the buying behaviour of the customers, MSPs also need to deal with constant margin and pricing pressure. Clients understand that technologies are constantly improving and becoming more economical - they typically expect a provider to maintain a competitive menu of services and offer additional features without a significant price increase each time that the service contract comes up for renewal. Providers are challenged to reduce costs in order to maintain clientele. This places a huge emphasis on process automation to reduce labour costs and is increasingly pushing providers to use offshore labour sources.

More and more MSP’s are providing customers specific services and restricting the amount of responsibility. This is strategically favourable as MSP’s providing customer specific model allows service providers to focus on what one customer needs and fulfil the same. While customers are looking for integrated managed service for better resource utilization and cost advantage in services. Integrated services can help in resource sharing and effectively reduced cost.

In general, the risk of losing valuable information is less in well know MSP’s as they follow the stringent security practises by following security standards like ISO27001, having said that it is the responsibility of the client to audit the security practises and the effectiveness of the controls.In the absence of regular Audit, the chances of losing data may crop up. In addition, the client won’t be losing the control due to outsourcing as the client has to own the effective delivery by setting up an efficient governance model.In outsourcing, the technical work is given outside but management responsibility, setting up roadmaps and new technology introduction in accordance to business needs lies with client.

Cloud computing has emerged as a complementary service in relation to managed services. Cloud services give the best Availability of services, Scalability, Costadvantage and quick turnaround time. Customers have option to choose the offerings based on their need such as SaaS,PaaS or IaaS.The infrastructure can be scaled up and scaled down as per the business demand.The customers pay for the services what they consume not for the whole infrastructure (Pay per use), this cloud infrastructure can be managed by Cloud integrated MSP.

The future of the managed service market is a promising one,provided the MSP’s adapt to the changing needs. For example, 10 years back Managed services comprise of maintaining server and networks etc. but with current trends it is going to be managing services end to end and have the option to use latest trends like Cloud. Hence MSPwill have to play a role of cloud administrator as well.